Closing the Racial Gap in Small Business Lending

Articles | January 19 2016

Even if you instantly eliminated all racism from mainstream financial institutions, it would do nothing to erase existing wealth inequality. The median net worth of white households in 2013 was $142,000, more than 13 times the median net worth of black households, $11,000. It’s a persistent gap, and one that has been growing. During the Great Recession, black families lost 47 percent of their wealth, compared to 26.2 percent lost for white families.

Besides fewer sources of capital from friends and family, that also means fewer assets to use as collateral for business loans from banks and other institutions. Hence the continued racial disparity in access to capital for minority-owned businesses. Small Business Administration (SBA) loans to African-American borrowers declined 47 percent between 2009 and 2013, even as overall SBA loan volume rose around 25 percent.  Read more here.